Province won't commit to passing along pot tax revenues

The Canadian government still expects provinces to pass on a third of the federal pot tax revenues they receive to municipalities but Manitoba hasn’t committed to do so here.

Federal Public Safety Minister Ralph Goodale said Thursday that his government bumped up provincial and territorial shares of the federal excise tax on pot from 50% to 75%, reducing its own share from 50% to 25%, primarily to ensure municipal cannabis costs are covered. The federal excise tax will add $1 per gram or 10% to the price of recreational marijuana sales, whichever is higher, once those sales are legalized on Oct. 17.

When asked if the feds can force the provinces to comply with that goal, however, Goodale indicated that’s not possible.

“Sometimes one level of government would like the authority to direct the other level of government but that’s not within our jurisdiction. But the public and municipalities and police governance organizations and law enforcement need to make sure that provincial authorities understand the importance of this priority,” he said.

Following legalization, the Federation of Canadian Municipalities estimates municipal governments will face $3 million – $4.75 million of cannabis-related costs per 500,000 residents each year. The FCM said that includes costs for everything from police and paramedic responses to zoning and administrative requirements.

But the Manitoba government hasn’t committed to pass along any federal or provincial tax revenue to the City of Winnipeg to cover those costs, said Winnipeg Mayor Brian Bowman.

Bowman said that’s despite the fact the province will also charge a 6% social responsibility fee on each cannabis retailer’s total annual revenues.

The mayor said the city expects to pay millions in cannabis-related costs, with a report due to specify the full tab in September. Without provincial support, he expects city taxpayers will be forced to support the new industry.

Winnipeg mayor Brian Bowman.

“My concern is that City of Winnipeg property taxpayers will be paying the costs of pot and I think that’s wrong,” said Bowman.

Requests to speak with Manitoba’s finance minister were not granted Thursday or Friday. In a written statement, Manitoba Municipal Relations Minister Jeff Wharton indicated the province expects municipal governments to provide proof of pot-related costs they “may incur.”

“Following legalization, it will be important for municipalities to track their actual incremental costs and any revenues they may generate from municipal business taxes and fees on cannabis retailers,” wrote Wharton. “This information will inform our approach to future discussions on the cannabis industry and its impact on our communities.”

Wharton believes provinces will bear the majority of costs related to cannabis legalization and revenues will fall short of that tab during the first year after legalization. The province also noted its social responsibility fee won’t be implemented until 2019 and the first payments aren’t due until June 30, 2020. And its already earmarked those funds to cover provincial regulation, education, health-care, addictions and public safety costs.

“The government is implementing this fee to ensure that cannabis retailers pay their share of public expenses resulting from legalization. This avoids Manitoba taxpayers and consumers from bearing these costs alone,” wrote Wharton.

Once pot is legalized, Manitoba Liquor and Lotteries will also charge wholesale markups on recreational cannabis of 75 cents per gram, plus an additional 9%, at the distribution level.

But Bowman questioned the province’s decision to lobby for immediate federal funding to cover provincial cannabis-related costs, while the same government instructs municipalities to collect proof of their bills for future consideration.

“I don’t believe that’s consistent with the approach the province and the federal government have. I don’t think the provincial government has provided a listing of their costs to the federal government,” he said.

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